Zendesk Agrees To Be Taken Private for $77.50 Per Share, Well Below Our Standalone FVE
We believe shareholders are not being adequately compensated.
Zendesk (ZEN) has agreed to be taken private by Permira and Hellman & Friedman for $77.50 per share in cash, representing a premium of approximately 35% to June 23′s closing price. On June 9, Zendesk completed its strategic review process, concluding that after considering a sale of the company, it was in the best interest of shareholders to continue to execute on its strategy. The deal is expected to close in the fourth quarter of this year. We see no material hurdles to the closing of this transaction within the specified time frame, and we are moving our fair value estimate to the $77.50 deal price. After lowering our growth outlook for many of our companies based on a return to normal as the pandemic recedes and other macro factors, we are applying that same framework to Zendesk and lowering our standalone fair value estimate to $115 per share, from $146 previously, in the highly unlikely event this transaction fails to close. While we think shares are undervalued, we have no reason to believe a better offer will emerge.
We are puzzled by the company’s decision-making process over the last three quarters, from the ill-conceived Momentive acquisition, to the rejection of a $128.50 per share takeout offer in February 2022, to then conducting a full strategic review only to conclude the best option was to remain a standalone company, to now being acquired for $77.50 per share. Clearly the environment has compressed multiples and pushed valuations lower. The company pointed to those worsening market conditions as the reason no bids blossomed from the strategic review. That said, we are left to wonder why the company is now selling at the bottom and believe shareholders are not being adequately compensated.
Dan Romanoff does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.